Bitcoin splits in 2

Bitcoin-themed
balloons at the "Inside Bitcoins: The Future of Virtual Currency
Conference" in New York.Reuters/Lucas
Jackson

Bitcoin
power brokers were unable to come behind a single solution that
would have preserved a unified cryptocurrency by Tuesday
morning's deadline.

As such, the digital currency has officially forked and split in
two: bitcoin cash and bitcoin.

Miners were able to seek out bitcoin cash beginning Tuesday
morning, and the cryptocurrency-focused news website CoinDesk
said the
first bitcoin cash was mined at about 2:20 p.m. ET.

"There seems to be some technical issues that might be slowing it
down, but yes, the fork has happened," Peter Borovykh of
Blockchain Driven, a blockchain technology company, told Business
Insider earlier on Tuesday.

Miners are the folks who solve complex computer problems using
software to unleash digital coins into the market. It took a
couple of hours after the official fork for miners to unlock the
first bitcoin cash coins.

"It seems as if people overestimated the mining power, or the
support from miners — hence, it is taking far longer than most
expected," Iqbal Gandham, the UK managing director at the social
investment network eToro, said in a statement sent to Business
Insider just before the split.

Bitcoin was the first digital currency built on blockchain
technology, in which transactions are independently verified by
the network without the need of a middleman like a bank. Bitcoin
cash is built on the same blockchain network as bitcoin, but the
new software increases the size of the "blocks" that make up the
network to allow it to process more information.

Supporters of the newly formed bitcoin cash believe the currency
will "breath new life
into" the nearly 10-year-old bitcoin by addressing some of
the issues facing bitcoin of late, such as slow transaction
speeds.

On one side are the so-called core developers. They are in favor
of smaller bitcoin blocks, which they say are less vulnerable to
hacking. On the other side are the miners, who want to increase
the size of blocks to make the network faster and more scalable.

Until last week, the solution known as Segwit2x, which would
double the size of bitcoin blocks to 2 megabytes, seemed to have
universal support.

Then bitcoin cash came along. The solution is a fork of the
bitcoin system. The new software has all the history of the old
platform; however, bitcoin cash blocks have a capacity 8
megabytes.

Bitcoin cash came out of left field, according to Charles Morris,
a chief investment officer of NextBlock Global, an investment
firm with digital assets.

"A group of miners who didn't like SegWit2x are opting for this
new software that will increase the size of blocks from the
current 1 megabyte to 8," Morris told Business Insider.

To be sure, only a minority of bitcoin miners and bitcoin
exchanges have said they will support the new currency.

Investors who have their bitcoin on exchanges or wallets that
support the new currency will soon see their holdings double,
with one unit in bitcoin cash added for every bitcoin. But that
doesn't mean the value of investors' holdings will double.

Because bitcoin cash will initially draw its value from bitcoin's
market cap, it will most likely cause bitcoin's value to drop by
an amount proportional to its adoption. Bitcoin
was already
trading down by 5.78% at $2,715 on Tuesday following word
that bitcoin cash had
gone live. Morris told Business Insider that bitcoin cash was
trading in the futures market for about $200 to $400 last week,
suggesting that's the range it would fall in during regular
trading.

Kraken, a bitcoin
exchange, tweeted Tuesday morning that it was experiencing delays
getting bitcoin cash to show on user's accounts.

"Please note," the exchange
said, that bitcoin cash "balances have not been credit yet."
It added that it was "working to credit as soon as possible."

"In the event of two separate blockchains after August 1, 2017 we
will only support one version," David Farmer, the director of Biz
Ops at Coinbase, a cryptocurrency exchange, wrote in a
blog post. "We have no plans to support the bitcoin cash
fork."

Coinbase has served nearly 9 million customers across 32
countries, according to the firm's website. The firm
has enabled the exchange of over $20 billion worth of digital
currency.

But just because some big players won't get behind it doesn't
necessarily mean bitcoin cash will be a dud or that it couldn't
eventually usurp the original bitcoin. Miners may rally behind
bitcoin cash if it turns out to be the better digital currency.

"Bitcoin cash has a chance to become the dominant cryptocurrency
contingent upon its ability to gain trust and support from both
current and new players as well as security of its network,"
Borovykh of Blockchain Driven said. "Due to, at least temporary,
solution of the scalability issues, bitcoin cash could attract
more new capital to the entire crypto space, thus helping
increase overall market cap."

Arthur Hayes, the CEO of BitMEX, a bitcoin derivative
exchange, told Business Insider he thought a fork would benefit
the cryptocurrency in the long run after some short-term
volatility and confusion.

"There are people with billions of dollars of skin in the game,"
Hayes said. "And they will ultimately go with the superior
bitcoin network, and the market will follow."